Hedge fund thesis wins doctoral thesis award

By: Jonathan Boyd | 15 Feb 2012

Juha Joenväärä’s doctoral thesis “Essays on hedge fund performance and risk” at the Oulu University has been awarded the first prize in OP-Pohjola Group’s Research Foundation’s Doctoral Thesis competition. The award is worth 10,000 euros.

In his thesis, Juha Joenväärä studies novel methodologies, based on economic theory and econometrics, of measuring and predicting hedge fund performance and risks. The research results show that regulators and investors would clearly benefit from the implementation of these methods.

The study examines how systemic risks can be measured using a new risk indicator. By means of this indicator, regulators can identify hedge funds which may threaten the stability of the financial system. According to the results, regulators should concentrate on factors related to the capital structure, counterparty risk and liquidity of funds, and less on leverage.

By using the new risk indicator, it is possible to choose hedge funds for investment that are likely to offer diversification benefits when most required, for example, in periods of extreme negative market movements. Judging by the research results, investment strategies based on liquid futures, in particular, create considerable diversification benefits.

The thesis also shows that the performance of hedge funds can be particularly well predicted by using indicators based on both the main characteristics of the funds, such as fee structures and redemption terms, and on analysis of economic cycles.

The Faculty of Economics and Business Administration of the University of Oulu approved the thesis on 20 October 2010 with the grade “excellent”.

Based on their own qualifier process, universities entered five doctoral dissertations for the Research Foundation’s tenth such competition. The Board of OP-Pohjola Group Research Foundation selects the winner.